All Forum Posts by: Max Gupton

My brother and law and I are managing a single family rental property inherited by our wives. The property is still in probate (and will be for awhile), so we can't make cash flow distributions yet because of certain estate rules. Since we're already doing all the tasks that a property Manager would do (operations, rent collection, finding tenants, accounting, etc), My thought was to set up an LLC as a property management company (owned 50/50 by the 2 of us) and charge a monthly PM Fee to the estate as a way to get money out without tripping estate rules.

From a legal perspective, Can we do this? Are there licenses/certs/etc that we need to set this up? Or would it be as simple as set up an LLC, execute a PM contract, start charging fees? The property is in GA (we live in NC/SC). Does it matter where we incorporate?

From an insurance perspective, would we need any kind of insurance on the PM LLC? We already have a landlord policy at the estate level for the house.

I’m currently in the process of selling my own house and, obviously, as part of that we have to get our house measured and have photos taken. Our realtor hired 1 guy that did both. Idk why, but I was amazed by this. He takes 1 trip to 1 house and gets paid twice (efficiency!!) for about 2.5 hours of work (he probably could’ve done it faster but he was a bit of a talker). And he had 12 houses to service that day. 

Does anyone else in the community run this kinda of business? I’m interested in trying to determine the profit potential. I can’t see too many operating expenses (outside of upfront equipment costs that would likely not be cheap). I know there would be skill/relationship building required at the start to build a profitable business out of this, but seems like such an efficient way to acquire multiple revenue streams.

Also, are there any other services like this related to buying/selling homes that could be bundled? From a quick google search I saw a local company that offers radon testing too. 

Thanks for the input! That makes sense. We would only be providing basics from the start (ie clean towels, coffee, etc). But certainly not providing maid services, etc during the stay. 

Thinking about listing my in-home apartment on airbnb and learned that airbnb income can be considered "active", not "passive" in the eyes of the IRS and results in the owner having to pay SE taxes on top of income taxes. Anyone have any good ideas on how to avoid SE taxes (legally)? I've read that providing "substantial services" qualifies you as running a business, similar to a hotel. A coffee maker/fresh towels at the beginning of a stay doesn't sound "substantial" to me, but then again, I'm not an IRS agent... What if you hire a management company to manage the airbnb rental? can you take the stance that the management company is providing the services, therefore keeping your involvement as passive instead of active and avoiding SE taxes? Thanks!

Substantial services:

• Changing linens
• Providing fresh towels
• Cleaning the rooms during a guest’s stay
• Providing hotel-like conveniences such as a coffee maker and coffee
• Providing vehicles, bikes, or excursion options

I live in an older neighborhood (1950s) in a hot market where there are a lot of investors are coming through, flipping homes and (I assume) making solid profits. I had a realtor look at my house and some comps and he thinks I could get about $410-415k going to market. However, I found an investor that has offered me $400k with 5k in earnest money and no buyer realtor commissions. I know it's under market, but after buyer/seller realtor commissions of 6%, plus paying for minor repairs and other misc costs to get the house in a salable condition, I'll still end up ahead. Plus no headaches of dealing with buyers coming in/out of my house and a fast close.

Based on my discussions with him, I think his plan is to flip the house. He's been doing this for awhile, so I have no doubt that he'll make a solid profit. Win-win, right? The only problem is, I've never sold a house by myself, so I don't know the ins/outs of the closing process and what all I should do to protect myself. I don't expect any malpractice as he is also a realtor. But, just doing my due diligence, I've had a family lawyer and my lender look over the contract. Both have said it looks pretty standard. One friend suggested I get a Due Diligence Fee rather than earnest money to get him more locked-in to the deal.

My question is, should I hire a real estate attorney (or other professional) to represent me in the closing? I asked my buying agent, and he said he would rep me, but it would be 1.75% ("firm policy") vs the typical 3%, which equates to $7k and would almost defeat the purpose of this whole process. I know attorneys aren't cheap, but I wouldn't expect something as simple as a closing to be all that expensive. Based on my research, it seems like the title company does most of the work. I'm not sure if I need one at all. I just don't want to screw myself/family over because of my own ignorance of the law.

Any suggestions/insight is greatly appreciated.